These are the best-run municipalities in SA – including Midvaal and Okhahlamba in KZN
- More than 90% of municipalities did not receive a clean audit in the past financial year.
- But South Africa has some local government success stories.
- Much of it has to do with a clean culture, and good leadership, says SA's auditor-general.
- For more articles, go to www.BusinessInsider.co.za.
The latest auditor-general report on local government financial management over the past year is, largely, a miserable read about the extent of ineptitude and fraud in municipalities.
Put together, irregular expenditure exceeding R32 billion was recorded in SA’s municipalities, and “lacklustre” revenue collection resulted in massive debt problems, with almost 85% of local governments struggling with cash-flow problems in the past year.
In his report, AG Kimi Makwetu details a lack of controls and mismanagement at most municipalities, which often struggled with political infighting and vacancies in key positions. Due to the lack of accounting skills, municipalities spent almost R1.3 billion on consultants – but only 14% of municipalities which used consultants showed an improvement in their audit outcomes, while 22% regressed, the AG notes.
Only 8% of municipalities received clean audits from the AG – their financial statements did not contain misstatements, nor did it breach key legislation.
This is the full list:
- Capricorn District
- Gert Sibande District
- Nkangala District
- John Taolo Gaetsewe District
- Cape Winelands District
- West Coast District
- Cape Agulhas
- Prince Albert
- Saldanha Bay
In his annual report, the auditor general singled out a couple of municipalities for solid financial management:
Midvaal (Meyerton) in Gauteng
The municipality is well run and a success story, the AG notes. “The municipal culture, driven by both the political and administrative leadership, is characterised by zero tolerance for transgressions and by taking personal accountability for maintaining good financial practices and sustaining clean audit outcomes.”
Midvaal has achieved a clean audit for the past six years as it has benefited from a high level of institutional knowledge since key management officials such as the municipal manager, chief financial officer, and head of supply chain management have been at the municipality for at least five years.
The municipality’s roads are generally in a good condition and recreational facilities such as parks and community swimming pools are well maintained.
Midvaal only spends 24% of its total revenue of R1.16 billion on salaries, which allowed for R130 million to be spent on various infrastructure projects during the year. This included a new R15 million reservoir and pipeline construction project, and R10 million for a roads tarring project.
The municipality pays its creditors within 10 days, on average – compared to the national average of a whopping 180 days.
The AG says other municipalities in Gauteng should replicate its model of good financial and performance management.
Capricorn District (Polokwane)
“Capricorn District should inspire confidence in other municipalities to prove that where internal control systems are implemented, key vacancies are filled and there is stability at management level, a clean audit outcome is within reach,” the report found.
The AG says that there was a big improvement in internal controls, thanks to “stability” in the positions of chief financial officer and deputy chief financial officer, as well as the involvement of the mayor in the audit process.
John Taolo Gaetsewe District (Kuruman)
The AG was impressed with the “sound control environment” at the municipality, starting with its access control system that uses fingerprint recognition.
“It is a pleasure to audit the municipality and officials are disciplined in the sense that they take responsibility for their respective work duties. This has also been evident in the adequate and effective record-keeping processes in place, which ensures the safeguarding of municipal information,” the report found.
ZF Mgcawu District (Upington)
While the municipality received a clean audit outcome for many years, this year it failed because of a single compliance finding. But the AG notes it is “well capacitated”, with strong leadership - including a qualified chartered accountant - who hold staff accountable.
This municipality has maintained a clean audit for four years.
“The message of commitment to clean administration was enforced at all meetings and displayed throughout the municipal premises. The municipality’s finance team was adequately resourced and understood what needed to be done.” While the roles of chief financial officer and municipal manager were vacant for part of the year, this did not weaken the control environment because of the culture of clean administration, the AG notes.
Thabo Mofutsanyana District (Phuthaditjhaba)
This local government is a good example of the municipal manager setting the right tone to institutionalise preventative controls, the AG notes. “The discipline for a culture of clean administration was demonstrated through the involvement of the municipal manager and senior managers during the audit, which resulted in their audit outcome improving from qualified to unqualified with findings. “
The report also commends the municipal public accounts committee, which thoroughly investigated irregular expenditure in the prior year.
The AG praised the leadership of the town, which worked to significantly reduce their interest payment to Eskom. The report says the municipal manager “set the right tone at the top” and created a culture of zero tolerance for poor performance, with the result that some officials, “especially those from the sections that had material findings in the audit report” resigned.
City of Ekurhuleni Metro
While the metro did not receive a clean audit, it has “actively embarked on a process of capacitating” its finance unit over the past few years, which has resulted in a gradual improvement in the quality of financial statements and a reduction in compliance findings, the AG says.
The Cape Winelands district is an example of a strong leadership tone at the top and active involvement of the municipal manager in all areas of the municipality, including the audit process, which enables a strong control environment and contributes to a culture of accountability, the report notes.
West Coast District (Moorreesburg)
The municipality has achieved nine consecutive clean audits, and has “a strong governance structure, a high level of accountability and a culture of implementing consequences when breaches are identified”.
Cape Winelands District (Paarl, Worcester, Stellenbosch, and Wellington)
The district has achieved six consecutive clean audits, and has a strong senior management team, the AG notes.
Pixley ka Seme (De Aar)
While the municipality did not receive a clean audit, the AG commended it for holding consultants accountable for poor services. Consultants were appointed for R2.2 million in 2019 to prepare financial statements after the municipality’s chief financial officer was suspended. But it was then found that their statements contained numerous errors, and the municipality only paid the consultants 65% of the contract amount. The consultants then offered to assist the municipality with resolving the issues for free.
Moses Kotane (Mogwase near Sun City)
This municipality was praised for making good use of consultants. The same consultants were used for two consecutive years, to help the municipality which did not have the necessary skills. The consultants became more proactive, liaising with auditors often and performing daily and monthly reconciliations of assets. “This change in attitude and approach enabled credible financial reporting informed by proper records management and reconciliations. Furthermore, contrary to what most municipalities did, the management in the municipality did not delegate their responsibility for financial statements to the consultants,” the report noted.
(Compiled by Helena Wasserman)
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